Sunday, August 5, 2012

Shhhh! Very quietly, start accumulating the stock of FB, (I.e. Facebook), but keep it on the down low"

Dow Jones Industrial Average 13,096  (UP) Week ending 08-03-2012

Personal Computers and the Internet grew out of the Hippie Movement in California. They didn't seem to like them much. They where trying to change the established social order. Nobody   thought any good could come out of their wild use of mind expanding drugs and their carefree lifestyles that contradicted everything that had been established at the time, that was the correct way to live your life. They wanted a new society.

But out of this liberating and creative activity 
sprung the genius of Steve Jobs and Steve Wozniak to build the personal computer. IBM thought it was a silly idea that only hobbyist would purchase. One of Xerox's people had designed the "Mouse" for a personal computer and the company dismissed it as folly, and sold it off to another garage hobbyist start-up guy named Bill Gates. What would they ever do with a mouse? How would they ever make money with something like that?

 Then there was this crazy guy named Bezos. He had no business whatsoever and was spending fortunes building gigantic distribution centers. Somehow he was going to just start selling everything on this new intranet system without even having a brick and mortar store.  What Folly! Sears and J.C. Penney laughed at him.  What folly was this, this company called "Amazon" of all things, that had no business whatsoever.
How would you price the stock of such a thing?  There was nothing to compare it to and surely it had to be highly speculative.  It was certain that it would run out of funding quickly and go out of business.  A change to the social order, sales without a traditional brick & mortar store, just a silly idea.

That brings us to present day.  The advent of the capitalization of Social Media.  Very powerful dynamics and exposure to many customers, but how would they make money?

Facebook (Symbol FB, $21.07) stock launches on the NASDAQ and it is a catastrophe.  The stock opens and trades all the way up to $42.00 a share, but the company  pre-announces a earnings warning mid-offering and throws the NASDAQ and Morgan Stanley into total turmoil with people buying and cancelling orders at the same time and trading in the stock all screwed up. The stock tumbles all the way down to bounce off of $19.90 a share this week.  The stock must be a bust and the unlock on the stockholders has not even happened yet. Gloom and Doom prevails.        ........     This is a message to me to take my first position ever in the stock at a price $20.07.  .............

The lockup guys are not going to come out and sell their stock at $20.00 when they know they have already seen $42.00 on the stock. The core business of Facebook is intact and the revenues continue to rise rapidly each year by billions of dollars.  Social media is here to stay. There is no box to put it into to try to group it with any other kind of business. Maybe Google?
That stock is trading at $639.00.  Linked-IN?  $99.00 per share. 

One way or another this stock has to be worth more than $20.00 per share. It is that single time in history, that moment stand still, where you can execute this trade for the long term and sit back and wait for results.

So enter onto the Wall Street stage one Mark Elliott Zuckerberg. Again a new face trying to change the social order of the way we live and not being accepted well for not playing by the traditional Wall Street rules. What does he have to offer? How about a company with 5 year sales growth of 465.10%. Well you can make percentages look inflated with small numbers, right?.   Facebook sales revenue from Smartmoney charts below: 

     Fiscal Year
Ending 2011
Fiscal Year
Ending 2010
Fiscal Year
Ending 2009
Fiscal Year
Ending 2008
Fiscal Year
Ending 2007
Slide the top numbers over to the right a bit and you get the idea of the rapid growth here. In Q1 , the company did already over 1.2 Billion in revenue , so they continue to stay on the growth path with sales. The rest of the stuff will sort itself out over time.  They are still spending a lot on infrastructure and development, so earnings will catch up to the rapid growth of sales at some point.

You need to BUY Facebook tomorrow, or at least start Accumulating some shares here. It is simply a great opportunity. Some day you will be sitting like a Fat Cat. (Well, or at least a muscular cat like Oscar below.

Oscar, one of our 4 cats. We also feed the neighbors cat.

So stay cool and out of this sweltering heat. Need to get the blog done, before the next storm comes in and knocks out the electricity.

Peace , Freewilly

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